Can Paying ‘Too Much’ or ‘Too Little’ Tax Contribute to Forced CEO Turnover?
57 Pages Posted: 23 Oct 2015 Last revised: 7 May 2017
Date Written: November 26, 2016
Our study examines the effect of corporate tax outcomes on forced CEO turnover. While prior research argues that firms often do not engage in tax avoidance due to reputational concerns, the empirical evidence suggesting the existence of reputational costs is scarce. In a broad sample of firms, we find evidence of a relation between the payment of low taxes and forced turnover. We also find that forced CEO turnover is more likely when the firm pays a high tax rate. Our results are consistent with the existence of previously unexplored individual reputational costs for not engaging in tax avoidance.
Keywords: CEO turnover, tax avoidance
JEL Classification: M40, H25
Suggested Citation: Suggested Citation